An electrical power utility requests that the Federal Power Commission (FPC)
approve an increase in rates for electricity in order to increase its revenues to
overcome falling profits. The FPC disapproves the increase and suggests that
the utility would do better if it reduced its rates.
On the basis of the above statement, which of the following is true?
(a)
The utility will not be able to increase its revenues, because it cannot
raise its rates.
(b)
The utility believes the demand for power is inelastic; the FPC believes
demand is elastic.
(c)
The utility believes the demand for power is elastic; the FPC believes
demand is inelastic.
(d)
On the basis of this statement none of the above can be true.
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